Welcome back to iLeads Mortgage Market Minute, where we bring you the latest, most relevant news regarding the mortgage market. We hope you enjoyed last week’s edition where we talked about Homes Flying Off Market At Record Pace – 46% Accept An Offer Within 2 Weeks. This week we’re bringing you:
Mortgage refinancing will be more expensive as Fannie Mae and Freddie Mac raise fees*
Consumers will have to pay more to refinance their mortgages after Fannie Mae and Freddie Mac announced that they are raising fees for lenders on the loans.
The change is designed to shield the two entities from the additional risk brought on by the coronavirus pandemic. In a letter to lenders, Fannie Mae specifically cited “market and economic uncertainty resulting in higher risk and costs.”
The price adjustment adds 0.5% of the loan amount to the consumer’s cost. That amounts to $1,400 on the average mortgage originated today. It will begin in September, which means it will basically apply to all refinances that aren’t already in process.
The move was met with strong criticism from the mortgage industry, seen as a slap in the face of the one sector of the economy that has been thriving during the pandemic. Read more in-depth here.
Homebuilding is on Fire; Best Pace in Over a Decade*
Residential construction rates soared in July with both permits and starts increasing from their June pace by double digits and topping 2019 numbers for the same period. Completions also rose, but at a more subdued rate.
The U.S. Census Bureau and Department of Housing and Urban Development said permits were issued during the month at a seasonally adjusted annual rate of 1,495,000, an 18.8 percent gain from June. That June rate was also higher than originally reported, revised from 1,241,000 to 1,258,000. Permitting is now up by 9.4 percent from the same period in 2019.
Permitting was significantly higher than had been forecast – with estimates among analysts polled by Econoday of 1,200,000 to 1,380,000 units. The consensus was 1,300,000.
Single-family permits were issued at the rate of 983,000 compared to a revised (from 834,000) June rate of 840,000 units. This was a 17.0 percent change for the month and 15.5 percent year-over-year. Multifamily permitting jumped 23.5 percent to 467,000 but that number was down 0.4 percent on an annual basis. Read more in-depth here.
Still Reeling From Last Week, Mortgage Rates Tiptoe Lower*
Mortgage rates managed to improve modestly for the average lender today, but they remain significantly higher than they were before last week’s regulatory drama. By the time we consider the size, scope, and the precipitous imposition of the new refi fee, we’ve never seen anything remotely similar. Lenders were definitely taken by surprise and they’ll definitely be paying dearly for all refis that were already locked. Read more in-depth here.
In a super-low rate environment, how can lenders get purchase loans done without putting refis on the back burner?*
Consumers are shopping around for rates, pushing the fallout rate for refis
Last week, the MBA reported that refinance activity rose to its highest level since May, now accounting for 65.7% of total applications – and everyone involved in the mortgage process is working hard to make sure those transactions go through. But as companies continue to compete on low rates, lenders are trying to balance maintaining a strong purchase presence with meeting client expectations in the refi market.
Lenders are faced with strong external pressures on both kinds of loans, but with purchase loans, there is a homeowner waiting to move into a house, which exerts its own kind of stress. As companies try to manage longer appraisal turn times and a finite number of underwriters and support staff for all loans, refinances might get put on the back burner. To top it off, low rates are pushing homeowners to shop around — even walking on deals when they realize that the numbers they see advertised don’t meet their expectations.
According to Sean Johnson, branch manager at loanDepot, historically low rates have been the greatest driver of the refi boom, but people working from home is also a factor. Read more in-depth here.
Here are 2020’s hottest housing markets according to ZIP code*
Colorado Springs tops the list
Compared to last year, the housing market this year has seen some big changes. Notably, people are moving inland from the large cities as the pandemic has created a coastal exodus, prompting apartment dwellers to seek more space and big yards.
Realtor.com released its hottest ZIP codes of 2020 report on Tuesday, which revealed that more towns in the Northeast made the list than last year.
“The hottest zip codes have bucked the national trend of a housing market slowdown during the COVID-19 pandemic,” Danielle Hale, realtor.com’s chief economist said in the report.
“Even during the pandemic, homes in the hottest markets were selling at a blistering pace, with the median days on market in all of the top neighborhoods being under a month,” Hale said. “Likewise, all of the hottest zip codes saw demand increase, with rising views per property on realtor.com compared to last year.”
Although the east coast was hit first and arguably the hardest by COVID-19, seven ZIP Codes from that area made the list – although outside of the bigger cities. Read more in-depth here.
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